The use of electronic signatures are becoming more common in practice. This term covers a variety of electronic methods by which a person or company can sign a document including by text, symbol or process, or more commonly, by using a digital pen or by scanning a handwritten signature into a document. It is important for businesses to comply with proper signing protocols to ensure that their agreements are valid and enforceable.

Key Points

• Electronic signatures are a valid way of executing agreements.
• However, certain requirements as to identification, reliability and consent are required under Australian legislation to ensure the validity of an electronic signature.
• Accordingly, you should be wary of adopting a standard approach to electronic signatures in all documents. It is also important to ensure that any other requirements for signing the document have been satisfied (for example, the use of witnesses).

Legislative overview

The Electronic Transactions Act 1999 (Cth) was enacted to implement the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce 1996 which established a set of internationally accepted rules to provide a more secure environment for electronic commerce, and subsequently updated to accord with the United Nations Convention on the Use of Electronic Communications in International Contracts 2005. In particular, it established a basic rule that a transaction was not invalid because it took place wholly or partly by means of an electronic communication. All Australian States and Territories have since enacted complementary legislation.

Signatures

As a general principle, signatures are typically required to evidence the signatory’s intention to be bound by the terms of an agreement.

Australian legislation requires (in more or less the same terms) that an electronic communication or document will meet the requirements of a signature if the following three criteria are satisfied:

1. Identification: The method of signing (a) identifies the person sending the electronic document, and (b) indicates that this person approves of the content of the document signed.

2. Reliability: The method of signing is as reliable as appropriate in the circumstances for the purpose for which the electronic document was generated or communicated, or otherwise fulfils the functions described as ‘identification’ above as proven by itself or together with further evidence.

3. Consent: There must be consent by the recipient to receive information electronically.

Difficulties with electronic signatures, therefore, arise when not all of these three criteria are satisfied. For example, the ability (or inability) to confirm the identity of the signatory and their intention to be bound by the content of the electronic document – particularly in cases where a witness is not used.

Digital signatures

A digital signature, unlike its electronic counterpart, refers to the encryption / decryption technology on which an electronic signature is built, such technology securing the data associated with a signed document and helping to verify the authenticity of a signed record.

Digital signatures are currently used by popular programs such as DocuSign which rely on public-key cryptography generally.

An electronic document signed by digital signature can assist to mitigate risks associated with identifying the signatory, however, most digital technology continues to rely on certain information (such as a private key) being kept secret.

Conclusion

It is important to be mindful of the need to prove the validity of an electronic (or even digital) signature. If a signatory is in doubt as to what constitutes a valid signature, they should obtain legal advice.

This article was written by Kathryn Martin, Senior Associate at Norton Rose Fulbright. kathryn.martin@nortonrosefulbright.com.

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